Swings of the Forex market are still in motion! | 17 January 2014

Review of the past week

The past week on the currency market was very eventful. According to its results, US dollar lost the part of its positions as compared to its main rivals. The last meeting of EuCB did not bring surprises. Monetary policy remained on the same level, regulator stated that it is still concerned with low inflation, but will not take any measures as of now.

On Friday the report on US labor market was released. Non-Farm payroll release is very controversial. Despite strong figures from ADP as well as the service index of employment from ISM, final Non-Farm was released on the point of 74 000 having demonstrated the least value for the last 2,5 years. Nevertheless, total unemployment level is reduced by 0.3 down to the level of 6.7%. Trade week was finished by Usd/Eur by growth up to the point of 1.3668.

Great Britain reported negative macroeconomic stats. Service PMI frustrated investors having shows the least values for the last 6 years. Also, trade balance and manufacture data was negative. Further to releases, GBP/USD quotations went down, but investors promptly re-bought this decline which says about strength of ascending trend. In general, a steady growth of GBP/USD pair had been witnessed over the week.

Full attention of investors was focused on the US data. Recordings of the last FRS meeting did not bring serious changes in “bulls” and “bears” alignment. American regulator stated that it expects a gradual tapering of stimulative measures and decisions will be made based in the view of situation with the labor market and inflation. On the last trading day labor market release was published n the USA. Unemployment level got down, but Non-Farm Payrolls data poured oil into the fire. Quotations managed to grow up to the point of 105.32 and fell by 150 points then. So, trading week was closed by USD/JPY just above 104.

Forecast for the week January 13 – 17:

Euro/US dollar:

In contrast to the previous week, this one is not as eventful. What is notable in European stats' releases is the German GDP per annum. Since on the last week EuCB Governor Mario Drahgi said that he would expect weak economic growth in Europe for the 2 coming years, the data from leading regional economy will be closely monitored by investors. On the one hand, the last year German neighbors had been notably behind German, thus, it is difficult to rely upon a considerable growth of GDP. On the other hand, private consumption had been growing over the recent months which can add positive figures to the final release. If all released data is above expectations, Euro/US dollar pair can get above 37.

A good deal of macro stats reports will be published in the USA. December retails will be reported on Tuesday. Growth of wholesales trades along with consumer confidence allow to expect retail figures to be just above the medium level of forecast's which will render a short-term support to the US currency. Besides, employment in the retail field considerably improved in December speaking for growth of this economic sector. Inflation data will be released on Thursday. It is hard to expect data to be above consensus forecast but if it happens, Euro/US dollar quotations will notably get down. The reason is that in the viewpoint of QE3 tapering, investors will be positive towards the growth of Consumer Price Index. In general, trades with Euro/US dollar will be based within the range 1.3530- 1.3750.

Pound/US dollar:

This week Great Britain will provide inflation and retail reports. It can be expected that data will be released in accordance with medium level of forecast that will provide British currency with a short-term support (since “cable” trend is ascending, investors will take any chance to move quotations up).

USA will publish similar figures and a moderately positive news background will support demand in the US dollar. Fight between bulls and bears in the Pound/dollar trades will be rather fascinating this week and meantime it's hard to predict which side will be winning. The most probable range for GBP/USD pair on this week is 1.6380 - 16580. 

US Dollar/Yen

Japan will release core machinery orders and consumer confidence index. This country provides positive data over the last time and we can expect good reports that will support Japanese currency. A moderately positive news background in the USA will contribute to stabilization of US Dollar/Yen. This week can be marked by flat tendency within the range of 103.30 - 105.50.